A manufacturer of playground equipment has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
$\begin{array}{|l|r|}
\hline \text { Denominator Level of Activity } & 3,000 \mathrm{MHs} \
\hline \text { Fixed Overhead Cost } & \$ 40,650 \
\hline
\end{array}$
The following data pertain to operations for the most recent period:
$\begin{array}{|l|r|}
\hline \text { Actual Hours } & 3,400 \mathrm{MHs} \
\hline \text { Standard Hours Allowed for the Actual Output } & 3,172 \mathrm{MHs} \
\hline \text { Actual Total Fixed Overhead Cost } & \$ 41,600 \
\hline
\end{array}$
-What was the fixed overhead budget variance for the period,rounded to the nearest dollar?
A) $950 unfavourable.
B) $1,381 unfavourable.
C) $2,790 favourable.
D) $4,470 unfavourable.

Question

Quizplus · Accepted Answer

The fixed overhead budget variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. In this case, the actual fixed overhead cost is $41,600 and the budgeted fixed overhead cost is $40,650. Therefore, the fixed overhead budget variance is $41,600 - $40,650 = $950 unfavourable.

A Manufacturer of Playground Equipment Has a Standard Costing System